Good evening, ladies and gentlemen. Welcome to China Literature's 2026 Interim Results Conference Call. A copy of the interim results announcement can be found and downloaded from its investor relations website, ir.yuewen.com. At this time, all lines have been placed on listen-only mode, and the floor will be open for questions following today's presentation. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to your host today, Ms. Maggie Zhou, Head of Capital Markets and Investor Relations at China Literature. Maggie, please go ahead.
Thank you, operator. Ladies and gentlemen, welcome to our 2026 Interim Results Conference Call. Joining us today on the call are Mr. Hou Xiaonan, our CEO, and Mr. Jackie Xu, our VP of Finance. For today's call, Mr. Hou will discuss the company's strategies and business highlights, and Mr. Xu will go through the financials. We will then open the call for questions. Before we begin, I would also like to remind you that management comments during the call will include forward-looking statements that are based on our current expectations. All statements other than statements of historical fact during the conference call are forward-looking statements, which are subject to a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of the company.
This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, the measures of the company's financial performance prepared in accordance with IFRS. Please do take a minute to read the risk factors and non-IFRS financial discussion in China Literature's 2026 interim results earnings release. I will now turn the call over to our Chief Executive Officer, Mr. Hou Xiaonan.
Thank you for joining us on today's earnings conference call. Before we go over our financial results, let me share a few thoughts on the industry landscape and our strategic priorities. Over the past year, we have had multiple in-depth discussions about where the content industry is headed. In particular, two structural shifts stand out. One is the continued rise of fragmented content consumption. The other is the revolutionary reshaping of the entire content ecosystem by AI. In response to these trends, we turned our insights into action and made decisive strategic moves. We started with live-action short dramas, kept up with the technology wave, and finally incubated a brand new content format, the AI-animated drama, by integrating AI deeply into the creative process.
In the H1 of this year, our short drama and AI-animated drama businesses delivered exceptional growth, with combined revenues exceeding RMB 430 million, over 3x that of the same period last year, accounting for 27% of our IP operation revenues and serving as a key contributor to the 42% year-over-year increase in IP operation revenues. More specifically, our short drama business delivered a steady stream of hit titles in the H1 of 2026, achieving a blockbuster rate 4x the market average while maintaining a balance of male and female-oriented dramas across our content portfolio. We also built a scalable approach to developing blockbuster IP into serialized short dramas, validating the potential of serialized IP operations in the short drama sector.
Meanwhile, leveraging the AI technology, we adapted over 1,000 online literature titles into AI-animated dramas, among which 46 titles surpassed 100 million views each, 367 titles exceeded 10 million views each, and the proportion of titles reaching one million views was 5x the industry average. In our view, these high hit rates reflect not only our ability to anticipate industry trends, but also the strength of our premium IP library and the deep creative ecosystem we have built across the IP value chain over the years. AI tools are undoubtedly ushering content supply into a new era defined by greater scale and speed, but this doesn't diminish the value of content. On the contrary, it reinforces the scarcity and value of premium IP. Visual content has become easier to produce, but only stories with cross-generational appeal that truly touch people's hearts will remain the foundation for sustainable monetization.
Powered by our IP plus AI engine Harness the synergy between technology and creativity to accelerate the high-quality transformation of stories from text to visuals, opening up the next decade of IP value creation. That mission guides us as we look into the future. With that, let me now walk you through our operating highlights for the H1 of 2026. First, in IP incubation, our online reading ecosystem continues to serve as a super reservoir of premium content. In the H1 of 2026, our platform attracted 240,000 new writers, generated over 460,000 online literature works, and added more than 30 billion characters, securing a strong source of content supply. Emerging generation writers are gaining momentum. Among newly signed writers who generated more than RMB 1 million in revenue during the H1, those under 30 accounted for 57%, representing a 49% increase year-over-year. Promising works continue to emerge.
On Qidian, the number of titles receiving user collections rose 37% year-over-year, while the number of titles receiving monthly tickets grew 26% year-over-year. With the return of a series of top-tier platinum and phenomenal writers, two new titles attracted more than 200,000 readers each on their first day of launch, setting new records for debut performance on the platform. Meanwhile, we accelerated the transformation from text to visuals. In the H1 of 2026, while solidifying our traditional strengths in film, drama series, and animation, we also stepped up our efforts in emerging segments such as short dramas and AI-animated drama, resulting in exceptional growth.
In the premium drama series and film segment, several drama series adapted from China Literature's IPs premiered this year, including top-tier titles such as "Blossoms of Power," "Bai Hua Sha ," "The Heir," "Jia Ye," and "Ashes to Crown," "Qiao Chu." They all ranked among the top titles on platform popularity charts during their respective broadcasting periods. Meanwhile, we also released our self-produced drama series, "No Pain, No Gain," "Nian Shao You Wei ," "The Devil Between Us," " Chú È ," and "Lady Liberty," "Ai Qing Miao Sheng Hua." These titles broke new ground across genres such as urban and crime dramas, winning both critical acclaim and strong audience traction.
In the animation segment, we released sequels of classic animated titles including "Battle Through the Heavens," "Doupo Cangqiong ," "The Outcast," "Yi Ren Zhi Xia," "Almighty Mage," "Quan Zhi Fa Shi," and "Stellar Transformations," "Xing Chen Bian." All these titles ranked among the top titles on platform popularity charts during their respective broadcasting periods. Among them, "The Outcast," "Yi Ren Zhi Xia," achieved a popularity index of over 21,800 on Tencent Video, making it the most popular 2D animated series on the platform in the past three years. According to Enlightent, since the start of this year, eight out of the top 10 animation series by cumulative views across all platforms were adapted from China Literature's IPs, further demonstrating our market influence in animation content. In the short drama and AI animated drama segment, as mentioned earlier, we achieved major breakthroughs.
In the H1 of 2026, we launched over 90 short dramas with many breakout hits. In male-oriented genres, "The Invisible Bodyguard," "Jin Shen Shi Wei," was a blockbuster with a popularity index exceeding 100 million and total views across all platforms surpassing 5 billion. In female-oriented genres, sequels of our original "Sweet Life," "Tiánmì ," IP performed strongly and setting a benchmark for commercialization. In the AI animated drama segment, our top-tier title, "Three Thousand Shelters," "Sanqian Bihu," surpassed 3 billion views across all platforms, driving the original novel into the top 10 of the bestseller ranking on Qidian. We also explored opportunities to develop premium AI animated drama platforms, launching Qidian Theater, Qidian Xu Chang, and Toons Glow in China and overseas respectively. All these achievements were driven by China Literature's extensive IP library, strong creator ecosystem, and robust capabilities in IP development across the industry chain.
Let me turn to IP commercialization. In the H1 of 2026, our IP merchandise business continued to maintain rapid growth, with GMV reaching RMB 780 million, representing a year-over-year growth of more than 60%. This growth was driven by our continued enhancement across four core areas: product, channel, operation, and ecosystem. On the product front, we strengthened our presence in the light and soft merchandise category, characterized by high-frequency purchases and strong repeat purchase rates while extending into new categories such as plush toys, lifestyle products, and precious metals. Our design excellence and supply chain efficiency enabled us to deliver a steady stream of high-quality products, positioning Yuewen Goods as one of the leading brands in China's anime merchandise market. On the channel front, we strengthened our self-operated online sales network, including mini programs, live streaming rooms, and flagship e-commerce stores.
We also optimized our offline store network and deepened collaboration with our channel partners. These efforts led to improvements in both channel profitability and brand control. We also continued to strengthen our sales velocity and supply chain management, improving inventory turnover efficiency and turning sales growth into solid profit contribution. On the operational front, we launched campaigns around iconic IP characters, driving deeper fan engagement and stronger consumer conversion. During the H1, we organized the Glory Pilgrimage pop-up event in four cities to celebrate the birthday of Ye Xiu, the leading character of "The King's Avatar". We also launched The Outcast Boy Group, bringing the IP to a broader audience through idol-style marketing and deepening the emotional connection between the IP and users. On the ecosystem front, we accelerated the expansion of our overseas channels.
Together with our partners, we opened our first global collectible toy concept store in Singapore, while selected products on the overseas online store for "Lord of the Mysteries" sold out shortly after launch. The popularity of our HIT merchandise further amplified the appeal of our IPs, driving users back to our content ecosystem, spending on while reading animation and drama series. Now, let me share an update on our progress in AI. At China Literature, AI is not confined to a single application. We have deeply integrated it into every stage of the content creation journey, from the spark of inspiration to user reach around the world. Recently, we launched the Buddy series of AI agents purposely built for the creative content industry, and upgraded three core products, Nova Buddy, Drama Buddy, and IP Buddy to provide content creators and operators with a comprehensive suite of AI-powered tools.
Nova Buddy is designed for online literature creators. In addition to AI-assisted writing support, it also provides copyright protection and anti-plagiarism services, helping safeguard creators' rights. Drama Buddy focuses on AI-animated drama production, covering the entire process, including creative ideation, content production, and project management, enabling the scalable production of premium AI-animated dramas. IP Buddy serves as the all-seeing eye of our in-house copywrite team, enabling the value assessment of a title within minutes and greatly improving the efficiency of selecting IP for adaptation and commercialization. Meanwhile, AI has also accelerated our global expansion. As of the H1 of 2026, more than 30,000 AI-translated works were available on the WebNovel platform, contributing 40% of the platform's novel revenue during the H1 of the year and enabling Chinese stories to reach global multilingual audiences more efficiently. We remain firmly convinced of the transformative power of IP and AI.
Over the past two decades, the Internet lowered the barriers to literary creation and paved the way for China Literature's growth into the company it is today. We believe that over the next two decades AI will raise the ceiling for creators and drive a substantial value enhancement of the entire content ecosystem. Deeply integrating AI into the creative process to drive growth is a key strategic priority for our future. We see AI as an amplifier of IP values with the power to make great stories reach their true, full potential.
We also recognize that the more capable AI becomes, the scarcer and more valuable original human creativity will be. That is why China Literature will continue to strengthen its support for original creators, ensuring that technology empowers creativity and that great stories thrive for generations to come. This concludes my remarks. Now I'd like to invite Mr. Xu to present our financial performance. Thank you.
Thank you, Mr. Hou. Hello, everyone. In the H1 of 2026, our total revenues increased by 10.7% year-over-year to RMB 3.53 billion. Let's start with our online business. Online business revenues were RMB 1.84 billion, compared with RMB 1.99 billion in the H1 of 2025. Mainly due to competitive pressure, which led to increased proportion of lower monetizing free-to-read content and shifted content distribution from online reading for short dramas and AI animated dramas on our self-operated products within the Weixin ecosystem. In terms of operating metrics, our total average MAUs were 134.1 million, compared with 141.3 million in the H1 of 2025. The decline was mainly due to our ongoing shift of core content distribution to our own platform products, leading to a continued drop in MAUs on third-party channels as user activity fell.
Average MPUs were 8.2 million, compared with 9.2 million in the H1 of 2025. Mainly because we distributed more free content on our self-owned platform products. Monthly ARPU increased 4.5% to RMB 32.7, reflecting a mixed effect as lower ARPU users shifting to free content during the H1 of 2026. Now turning to IP operations and other businesses. In the H1 of 2026, revenue from IP operations and others increased by 14.3% year-over-year to RMB 1.69 billion. In this segment, revenue from IP operations increased by 41.9% year-over-year to RMB 1.61 billion. Primarily driven by rapid growth across multiple business lines, including short dramas, AI animated dramas, TV and web series, and IP merchandise products. In particular, revenues from short dramas and AI animated dramas exceeded RMB 430 million, up 2.3 x year-over-year.
This accounted for approximately 27% of IP operations revenues and has become a new growth engine for our IP businesses. Our IP merchandise business also maintained strong growth momentum, with GMV increasing over 60% year-over-year to RMB 780 million. Revenues from the others category, mainly generated by sales of physical books, increased by 14.4% year-over-year to RMB 77 million. Now let's look at costs and expenses. In the H1 of 2026, our cost of revenues increased by 10.2% year-over-year to RMB 1.74 billion, primarily driven by higher production costs for short dramas, AI animated dramas, and TV and web series, which rose in line with revenue growth as more content was released during the period. As a result of the foregoing, our gross profit increased by 11.1% year-over-year to RMB 1.79 billion.
Gross margin was up from 50.5% to 50.7% year-over-year. Our selling and marketing expenses increased by 9.6% year-over-year to RMB 1.01 billion, mainly driven by higher marketing and promotional spending to support the expansion of our IP businesses. As a percentage of revenues, our selling and marketing expenses decreased from 28.9% to 28.6% year-over-year. Our G&A expenses increased by 13.5% year-over-year to RMB 560 million, reflecting higher personal and administrative expenses related to scaling of IP businesses. As a percentage of revenues, our G&A expenses increased from 15.2% to 15.9% year-over-year. Our net other losses were RMB 25 million, compared with net other gains of RMB 523 million in the prior period.
The change was mainly due to RMB 134 million in late payment tax surcharges incurred by a subsidiary of the company during the H1 of 2026, compared with RMB 598 million of net gains on the index total of investments in the H1 of 2025. As a result of the above factors, our operating profit was RMB 271 million, compared with RMB 826 million in the H1 of 2025. On a non-IFRS basis, operating profit was RMB 367.2 million, compared with RMB 449 million in the H1 of 2025. Our income tax expense increased from RMB 115 million to RMB 225 million, mainly due to RMB 166 million in supplementary income tax payments by a subsidiary of the company. Together with related late payment tax surcharges of RMB 134 million, which was recorded in our losses. These tax-related items reduced our profit by RMB 300 million.
Our net profit to shareholders was RMB 135 million, compared with RMB 850 million in the H1 of 2025. On a non-IFRS basis, our net profit to shareholders was RMB 259 million, compared with RMB 508 million in the H1 of 2025. Largely due to the RMB 300 million tax related impact discussed above. This concludes our financial review part. Let's move on to the Q&A session.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Maggie Ye with CLSA. Please go ahead.
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We have witnessed the rapid growth of short drama and AI-powered animated drama in China. So wondering what is management's latest view on the industry's long-term growth trend and your outlook for China Literature's revenue opportunity in this segment. Additionally, as the AI generated content scales on China Literature's platform, how do management expect the substitution effect on the traditional reading consumption to persist? Thank you.
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Thanks. This is the CEO of China Literature. Thanks for your question. I will take your question regarding the short dramas and AI animated dramas. We believe the mass production and traffic-driven growth model for short dramas and AI animated dramas is rapidly fading. The trend is shifting from quantity to quality, and competition now focuses on storytelling quality and hit-making consistency. This represents a structural advantage for top-tier players like China Literature with rich IP reserves and premium content production capabilities. China Literature has the largest original literature IP library in China, addressing the industry's core problem head-on, which is the shortage of compelling stories. Our proven methodology for hit-making is already delivering results.
In the H1 of the year, the hit rate of our short drama was 4 x the market average, and for AI animated dramas, the rate of titles exceeding 1 million views was 5 x the industry average. 46 titles each exceeded 100 million views. On the ecosystem front, we launched Project Spark Craft, especially for AI animated drama business. The project plans to invest over RMB 100 million in building up the industry ecosystem across four dimensions: IP cooperation, platform support, systematic training and funding. Our in-house developed AI agent, DramaBuddy, purpose-built for AI animated dramas, has also served over 200 studios, providing technical support for ecosystem development.
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In response to this trend, China Literature's strategy is very clear. That is, we leverage our rich IP reserve to embrace the entire ecosystem. We are proactively strengthening our capabilities in two critical procedures, including the development of script and IP, as well as user acquisition and commercialization, while outsourcing the visual production to external studios. This asset-light model of controlling both upstream and downstream while outsourcing the midstream, allows us to rapidly scale production capacity by leveraging the industry ecosystem, an approach that is most suitable to China Literature at this stage. We believe that AI animated dramas represent a natural extension of IP, from text to visual formats, complementing our premium literature business. Since the beginning of this year, various hit adaptations have been continuously feeding back positively into literature works. The adaptations of short dramas and AI animated dramas, in particular, have demonstrated strong momentum.
For example, one of our blockbuster AI animated dramas, "Three Thousand Shelters", " Sanqian Bihu " , has surpassed 3 billion views across all platforms, directly driving the original novel back into the top 10 of the best-seller rankings on Qidian. Following the release of our short drama, "I Really Didn't Want to Be Reborn", "Wǒ zhēn méi xiǎng chóngshēng a" , the original novel exceeded 100,000 average subscribers per chapter, validating that high quality visual content can channel incremental users to our online reading business.
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While some non-core readers may migrate to AI animated dramas, the core value of AI animated dramas lies in reaching more audience, in addition to the original users, and breaking through the boundaries of IP formats, unlocking the value of visualizing China Literature's vast IP library, and creative ecosystem. This is our greatest opportunity. If we look at the entire IP library of China Literature, the proportion of IP that has been developed so far is less than 0.1%. As AI tools continue to lower the barriers to content production, there remains enormous room for growth in both the speed and scope of IP development going forward.
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Thank you.
Your next question comes from Gigi Zhou with Guangfa. Please go ahead.
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And I will translate the question myself. I want to ask about the competitive dynamic and mutual displacement between manga dramas and short dramas in terms of distribution channels. How are the distribution channels for the two formats distributed overall? For example, the share between Hongguo and the self-developed apps and mini-programs. What are overseas strategies for your manga dramas and short drama going forward? Thank you.
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China Literature CEO Mr. Hou will take this question. Our short dramas and AI animated dramas are distributed on a full set of industry channels, including leading platforms such as Hongguo, Douyin, Kuaishou, Tencent Video accounts, and Bilibili, as well as our self-owned mini-programs and apps. In addition, we are currently in discussions with long-form video platforms as well regarding potential partnerships. In the H1 of the year, over half of our short-form dramas and AI animated dramas were launched on Hongguo. We do not rely on any single channel. Decisions on which platform a specific title is to be distributed on and whether to adopt a paid or free model are made by our operation team based on each title's content features and the marketing timing. As the landscape of the distribution channels, the video platforms continues to evolve, we will remain agile in adjusting our channel strategy accordingly.
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This year we launched our overseas premium AI animated drama platform Toons Grow, and plan to release over 1,000 titles within the year. We are also exploring the development of AI animated dramas based on overseas original IP. The rationale behind this strategy is clear. First, as the global market for short dramas and AI animated dramas is vast, and China has built up proven expertise in short-form content production that is readily exportable. Second, AI animated dramas are predominantly centered around genres such as anime, isekai, fantasy, and these categories inherently carry stronger cross-cultural appeal and face lower barriers to be accepted by international audience.
Third, AI has significantly reduced content production costs, making large-scale overseas expansion economically viable. In general, our overseas short drama and AI animated drama business remains in its early stage of exploration. We will provide timely updates to the market as we make meaningful progress going forward.
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Meanwhile, we would also like to note that the AI animated drama industry is growing very rapidly and the market potential is enormous. AI animated drama represents one of the most direct use cases for AI generated video technology, and AI empowers the entire workflow of video production, including pre-production, where it assists in topic analysis, script generation, and scene design; filming, where it enables virtual production and virtual set rendering; and post-production, where it delivers intelligent editing and automated visual effect composition. Every stage is being redefined by AI. We expect the boundary between human-created and AI-generated short dramas to become increasingly blurred over time, which will fundamentally reshape content creation. The future forms of short dramas and AI animated dramas may probably extend far beyond what we can imagine today.
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Thank you.
Your next question comes from Rebecca Shaoul with Morgan Stanley. Please go ahead.
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I'll translate myself. My question is regarding the online reading business. Could management help us break down the key drivers behind the weakness in the H1? Which factors are temporary and which may reflect more general changes? Could management share the near or long-term outlook for the online reading business, and what are the key drivers for that? Thank you.
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Thank you for your question. Mr. Huang, Senior VP of China Literature will take this question.
First of all, from our view, the core online reading business will remain stable with its strategic positioning keeping unchanged. The revenue decline in the H1 you mentioned, was mainly due to the adjustments made for channels with lower user stickiness, while the core pay to read product and ecosystem remained steady. First of all, for our users, the proportion of free to read content with relatively lower monetization efficiency increased on our self-owned channels within Weixin ecosystem. Secondly, the content distribution is shifting from text to visuals, such as short dramas and AI animated dramas. This is the natural reallocation of content and traffic in the ecosystem in our view.
Specifically, user attention is shifting toward visual content, while the visual content is adapted from our own IP and can ultimately feed incremental value back into the reading ecosystem. As we previously mentioned, AI animated dramas such as "Three Thousand Shelters", "Sanqian Bihu", and the other project cases actually channeled incremental users back to the reading ecosystem. In this sense, user value is flowing from text to visual formats within our ecosystem, and both formats are owned by China Literature.
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We believe the foundation of our online business remains solid. In the H1 of this year, the ecosystem of our premium content creators stayed vibrant, and the top-tier writers continue to hold steady. In the recent year, the contract renewal rates for our platinum and phenomenal writers reached 100%. At the same time, emerging generation writers have been rising rapidly, with new writers and their debut works accounting for 54% of all titles that exceeded 10,000 average subscribers per chapter over the past 12 months. We have also continued to attract external writers, with the submission volume we received growing 14% year-over-year in the H1 of this year, including submissions from a number of quality writers previously active on other platforms.
Behind all of this is a robust and stable creator ecosystem, along with consistently leading IP incubation capabilities. These are the core assets that lay the foundation for downstream business such as short dramas, AI animated dramas, TV series, films, and merchandise. We believe they also constitute the moat of China Literature that is difficult to be replicated.
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Looking into the immediate long term, the growth potential and the strategic focus for our online reading business are centered on three key directions. First, we will continue to solidify our premium content ecosystem, embrace and accelerate the content format upgrade from text to visual to amplify IP value, while also feeding value back into the reading business. Second, we will expand the content supply and maintain a healthy and vibrant creator ecosystem. Third, we will firmly advance our overseas expansion strategy to unlock monetization opportunities in overseas markets. These three measures will form powerful synergies, steadily incubate quality content, and transform text-based content into richer multimedia formats, driven by the joint integration of IP and AI to propel China Literature into its next phase of growth. Thank you.
Your next question comes from Xueqing Zhang with CICC. Please go ahead.
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Thanks management for taking my question. I have a couple of questions. My first one is about overall IP business. IP operations delivered broad-based growth in the H1, with particularly strong growth in merchandises GMV, while short dramas and AI animated dramas emerged as new growth drivers. How does management view the growth outlook for the H2, and where do you expect the key incremental contributions to come from? In particular, on game licensing, we have noticed that several major games based on IP licensed by China Literature will launch in the H2. Do you expect these titles to make a meaningful incremental contribution?
My second question, about New Classics Media, is the long-form video industry is undergoing a period of adjustment. As a leading television production company, how is NCM responding to the industry challenge? With the rapid development of AI video generation models, how does management view the company's strategy and opportunities going forward? Thank you.
This is the conference operator. We have temporarily lost connection with the speaker line. Please continue to hold. The conference will continue shortly. Thank you for holding. The conference will now recommence.
Our CEO, Mr. Hou, will take your question regarding our IP development, and later on, Mr. Cao from New Classics Media will take your question on media production.
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Yes. As you mentioned, our IP business in the H1 delivered very good results in various aspects, with AI animated dramas and short dramas becoming our new growth drivers. Our merchandise business continued to achieve very good GMV performance and growth. Looking into the H2 of the year, our IP business will continue to gain momentum, especially for the new business segment. Specifically, for short-form drama and AI animated dramas, we are expanding production capacity while maintaining a high hit rate and pursuing a premium content strategy both domestically and internationally. Specifically, for short dramas, we plan to produce no fewer than 200 titles this year, representing an increase of approximately 70% year-over-year. In terms of AI animated dramas, our capacity of premium production has already exceeded 100 titles, and our proven methodology for creating hits continues to deliver results.
While AI has lowered the barrier to visual content production, it has intensified the scarcity of high-quality IP. In the H1 of the year, both our short dramas and AI animated dramas consistently outperformed the industry profit rate average by several multiples, a testament to our deep IP reserve, a creative ecosystem spanning the whole value chain, and the story core that deliver cross-generational emotional resonance. At the same time, we have also rolled out premium AI animated drama platform both domestically and internationally to further strengthen our premium content strategy.
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In the H1 of 2026, our merchandise business continued to gain momentum across four key dimensions: IP influence, product development, channel expansion, and brand licensing, resulting in apparently stronger user attraction. Regarding top-tier IP influence, we are deepening our operations of flagship IPs and reinforcing them across three fronts, which are category expansion, event-driven activation, and user experience to systematically unlock their full potential. For example, our immersive events like the Glory Pilgrimage pop-up for Ye Xiu's birthday and the debut of The Outcast Boy Group brought the IP closer to users, driving repeat purchases among core fans, while deepening emotional connections between our IP characters and their audience. On product development fronts, Yuewen Ichiban Kuji, the sub-brand of Yuewen Goods, has rapidly grown into one of China's leading domestic anime merchandise brands.
With multiple premium Ichiban Kuji style product series covering new and popular categories such as bags and luggage, apparel, and plush toys, addressing diverse fan demands for merchandise. Virtually every product we have launched to date has sold out within moments of release. Regarding channel expansion, our omni-channel network continues to improve. Online mini-programs like Xing Luo and e-commerce flagship stores are growing rapidly, while our offline store network is also expanding steadily, and currently we operate a total of 17 stores across the country. Notably, in the H1 of this year, GMV from our online self-operated channels was 3x that of the same period last year, underscoring both the effectiveness of our self-operated channel network and the users' growing brand recognition for Yuewen Goods.
Regarding brand licensing, since the beginning of this year, we have entered into licensing partnerships with hundreds of brands from a variety of industries, including goods and fashion toys, 3C digital products, food and beverage, apparel, restaurant chains, and others. Looking into the H2 of this year, in terms of merchandise business, we will continue to focus on product iteration, channel expansion, and operational efficiency improvements. A key objective is to improve profit conversion efficiency and to achieve higher quality and more sustainable growth.
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Regarding our overseas business, it is still in a growth phase with a clear strategic roadmap. The domestic online reading business currently supplies the content foundation for our international expansion, and AI-powered translation is accelerating global reach, including those languages less commonly spoken. The AI-powered translation is a key driver for the global reach. At the same time, incubation of original local IP is underway and is steadily expanding. Multiple original literature works created by local writers in overseas markets have already entered the adaptation stages into various formats, including offline publication and audiobooks.
We plan to initiate collaborations on a series of additional titles in the H2 of the year. In terms of visualization and commercialization in the overseas markets, our premium AI-animated drama platform, Toons Glow, plans to launch over 1,000 titles within the year. We have opened our first global collectible toy concept store in Singapore, both of which will contribute to future business growth.
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In terms of games, we license our premium IP to game studios, earning both upfront licensing fees and a grossing share. Grossing sharing, which is a high-margin, low-risk revenue stream for China Literature that contributes to our IP operations business on a recurring basis. Looking into the H2 of this year, a number of key game titles are selected for launch. Notably, projects include, first of all, an MMO game adapted from Battle Through the Heavens, published by 37 Interactive Entertainment, which started open beta testing on July 29, 2026. Secondly, a management simulation mobile game adapted from My Heroic Husband, scheduled to launch its open beta testing across all platforms tomorrow, August 12, 2026. Third, a flagship UE5 MMO game adapted from Lord of the Mysteries, developed by Kuaishou, scheduled for open beta testing on August 21, 2026, for which pre-registration is now fully open.
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The above are my comments on our IP business outlook. Next, Mr. Cao from NCM will answer your question regarding media production.
We believe the current industry downturn reflects two underlying dynamics: platforms tightening content budgets, and short dramas increasingly capturing users' attention. However, consumers' willingness to pay for high-quality content remains intact. This adjustment cycle will accelerate the market's curation, weeding out mediocre offerings. Premium long-form dramas will become scarcer, and their scarcity premium will grow.
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In the current long-form drama market, consumer expectations for content are higher than ever. We believe that drama studios should refocus on the fundamentals of content creation, with a dedicated emphasis on producing premium series of superior quality and depth. The IP value and emotional connection built up by a premium drama form the bedrock of our content ecosystem, and the ability to consistently produce such premium content is exactly New Classics Media's core competitive advantage.
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Regarding AI technology, we believe that while AI video models will fundamentally reshape the production workflows, cost structure, and the delivery speed of film and television projects, they cannot substitute for core value of compelling storytelling, outstanding performance, and the refined aesthetics. Currently, we are exploring the application of the latest AI video technologies into our production process to reconstruct and upgrade our workflows, spanning script assessment and structural deconstruction, concept art and digital asset design, virtual scene design and cinematography, and visual special effects, among others. That said, all of these efforts are anchored by the aesthetic judgment and creative instincts of our professional talents. Whether a story carries emotional depth and whether a script meets the highest standards ultimately rest with our creators. Ultimately, professional creative talent is what makes a project succeed.
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In July, China Literature entered into a partnership with Shanghai Pudong New Area to co-establish the AI Cultural and Creative Industry Base, which has already attracted cultural creators and rolled out a series of AI industrial facilities. The initiative aims to establish an industrialized framework for high-quality AI-powered cultural and creative content, with AI-powered film and television production serving as an important part, and New Classics Media will also be deeply involved.
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Looking into the future, New Classics Media will stay true to its identity as a top-tier content creator with a relentless focus on excellence across the entire production process, from script incubation and pre-production planning to filming and post-production, in order to bring more high-quality works to our audience. At the same time, we will capitalize on the dividends of technological innovation, deploying AI to reshape our productivity, including cost control, efficiency improvement, and capacity expansion, thereby further strengthening our market leadership in the premium drama segment. Thank you.
There are no further phone questions at this time. I will now hand back to Maggie Zhou for closing remarks.
Thank you, operator. We will now conclude today's call. On behalf of the entire China Literature management team, I would like to thank you for your participation on today's conference call. If you have further questions about the company, please feel free to contact us. Thank you and goodbye.
That does conclude our conference for today. Thank you for participating. You may now disconnect.